Last week I wrote about renting your place on Airbnb while you are away. This is the other path: a proper tenant, a proper lease, rent arriving every month. It is steadier, simpler, and it runs on a legal culture you should understand before you sign anything. Here is how it works, what the tax looks like, and what the numbers really add up to.
The law starts on the tenant's side
In Portugal, letting a home is not like letting a parking space. The urban lease law, the NRAU, treats the tenant as the weaker party and writes the rules accordingly. Once you accept that, everything else makes sense.
The lease must be in writing. It names you and the tenant, with both tax numbers, and you register it with the tax office, Finanças. You issue a receipt for every payment, electronically these days. Handshake deals do not exist here. If the lease is not registered, you are the one with the problem, not the tenant.
What you can ask for upfront
There is a legal ceiling on what a tenant pays before moving in: the first month's rent, up to two more months in advance, and a deposit of up to two months. Five months' rent in total, maximum. That is the law, not a starting position for negotiation. If a manager tells you to ask for six, find another manager.
The rent can only rise once a year, by the official number
You cannot raise the rent because the market moved. Once a year you may apply the official coefficient, calculated from inflation: 2.24% for 2026, with 2.56% announced for 2027. You must give the tenant 30 days' notice. That is the whole mechanism. Set the starting rent as if you will live with it for years, because more or less, you will.
Getting a tenant out is the hard part
Read this paragraph twice. Evicting a tenant in Portugal is slow and formal, handled through a dedicated channel called the Balcão Nacional do Arrendamento. In July 2026 the government proposed reforms to speed things up: cutting the arrears threshold from three months to two, acting against tenants who repeatedly pay more than eight days late, and letting landlords refuse the first automatic renewal. At the time of writing, that reform is still before parliament. It is not law yet.
The practical lesson is simple: choose the tenant as carefully as you chose the property. References, proof of income, a proper contract. Undoing a bad choice here takes a long time, so do the careful work at the start.
The tax: a new 10% rate, with fine print
Rental income is taxed under IRS Category F, and here the news is genuinely good. Under the 2026 housing package, residential leases with monthly rent up to €2,300 qualify for a 10% flat rate, down from 25%, on income earned through the end of 2029. Above that ceiling the standard rates apply: 25% for residential contracts signed or renewed since October 2023, 28% for the rest and for non-residential leases.
What you can deduct: maintenance and repairs, the IMI property tax, insurance, and management costs. Keep every invoice. Deductions are only as good as your paperwork.
One warning for buyers who will not live in Portugal: non-residents pay a flat 28% on rental income, with far less room on deductions. Your home country will probably want its share too. That is a conversation for a tax adviser, not a journal article.
The honest math
Take a €500,000 apartment in Lisbon, rented at €1,800 a month. That is €21,600 a year.
Tax at 10%: €2,160. IMI, say €800. Insurance and maintenance in a normal year, roughly €1,500. A manager taking 8 to 10% costs about €1,900. That leaves around €15,000, which is 3% of the purchase price, before any mortgage or vacancy.
Nobody gets rich on 3%. What you get is a property that largely carries itself while you wait for the part of the return that actually matters in Lisbon: what the asset itself is worth in ten years. If someone shows you 6% net on a long-term let in prime Lisbon, ask what they left out of the calculation.
Long-term vs Airbnb, honestly
The Airbnb route I wrote about last week can gross more, sometimes much more. It also costs more: the licence, the constant turnover, the management fees, the empty weeks. Long-term renting is the opposite trade. Lower gross, lower costs, almost no work, and a tenant who treats the place like home, because it is home.
For most of the buyers I work with, the boring answer is the right one. Buy the home you would be happy to keep. If you rent it out, do it long-term, declared, and compliant.
How I help
Before you buy for yield, we do the math together with real rents for the actual street, not brochure numbers. I introduce you to managers who answer the phone, and to a Portuguese accountant before the deed, not after the first tax bill. And I will tell you when the numbers do not work. That is the most useful thing anyone can tell you about a rental investment.
Sources
- Residential leases follow the NRAU and the Civil Code: written contract naming both parties with their NIFs, registration with Finanças, electronic rent receipts; upfront payments capped at five months' rent in total (first month, up to two months in advance, up to two months' deposit) (theportugalbrief.pt)
- Annual rent rises limited to the official INE coefficient: 2.24% in 2026, 2.56% announced for 2027, with 30 days' notice to the tenant (theportugalbrief.pt)
- Eviction runs through the Balcão Nacional do Arrendamento; the July 2026 government reform (two-month arrears threshold, action on repeated late payment, refusing the first automatic renewal) was still before parliament at the time of writing (reuters.com; expatica.com)
- Rental income under IRS Category F: 10% autonomous rate for residential leases up to €2,300/month on income through 31 December 2029 (Article 45-C(1) of the EBF); 25% for residential contracts signed or renewed since October 2023, 28% otherwise and for non-residential; deductible maintenance, IMI, insurance and management costs (benoitproperties.com; visas.pt; bitizenship.com)
- Non-residents pay a flat 28% on Portuguese rental income with limited deductions (portutax.com)